Transcript

Here in London and in cities across the world, Uber makes life a lot easier. Uber cars cost much less than black cabs and are simpler to find than many cabs. Because Uber makes our lives easy, it is easy to think that Uber is a brilliant business worth every bit of its $68 billion valuation.

Now, its ascent was interrupted by ugly stories about its corporate culture and its CEO Travis Kalanick. As Uber grew, it seems to have become a rule-bending, growth at all costs, misogynist Shark Tank. Happily, a new CEO, Dara Khosrowshahi is on board. Culture, however, may not be new boss's biggest challenge.

Uber lost $3.3 billion in the last year on turnover of $9 billion. Investors' money is all that is keeping it afloat. Those investors are betting that Uber will own the software that unites a huge, fragmented global industry. Such a business could combine minimal capital costs-- it owns no cars-- with high market share. That market share, in theory, will flow from network effects.

When Uber has attracted enough drivers in an area, the ease of getting rides attracts riders. More riders will attract more drivers still, and more riders and so on, until Uber dominance. Using investors' money to subsidise the drivers was supposed to set this virtuous cycle spinning. But the persistent and widening losses suggest that it may be struggling to turn it on its own.

Is Uber finding that even when it dominates a market, it has little pricing power. Or that its drivers leave quickly when the subsidies are withdrawn? It will be hard to know, so long as Uber remains a private company. Mr. Khosrowshahi wants to take Uber public within a few years. It will take more than a healthy corporate culture to make that happen. That is the FT view.